Carbon Pricing

Carbon Pricing

Economists say that if you want less of something, increase its price.

Carbon pricing involves imposing a fee on the burning of carbon-based fuels (coal, oil, gas). It is recognised by most prominent economists as the core policy for reducing and eventually eliminating the use of fossil fuels, whose combustion is destabilising Earth’s climate and sea levelPutting a price on carbon gives consumers and producers a monetary incentive to reduce their carbon dioxide emissions.

If levied at the mine, well or port of entry, the resulting price signals propagate throughout entire economies, influencing billions of purchasing decisions. If the carbon price starts low and rises annually economies have time to adjust, without causing undue economic stress. In addition, the credible prospect of increasing fossil fuel prices spurs investment in low carbon energy, goods and services.

For a policy to be sustainable it must be accepted by the public. The most politically sustainable policy – a carbon dividend solution – is explained here by Ted Halsted:

While Ted Halsted’s carbon dividend solution has not yet been enacted, British Columbia’s carbon-tax-shift has been a political success.

In his book Carbonomics, top economist Steven Stoft named a fully rebated carbon tax policy the Untax. In this skimmable chapter he explains in detail why it is fair: Why Untaxing Is Fair

A problem with all national carbon pricing schemes is high carbon prices make domestic energy intensive industries uncompetitive in the global marketplace. Industries either go out of business or move abroad taking their jobs and tax revenues with them. The solution is for the main industrial economies to negotiate a common carbon price commitment.

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